May 15, 2009
Salary increases vs. group benefits
By W. Michael Thomas
CFP, CLU, CH.F.C., R.F.P.
Employee compensation continues to be at the top of the list for many employers, especially as the economy continues to tighten. The two most common types of compensation for employees are salary increases and employee benefits. Many companies are being forced to cut back annual pay raises ranging from one to three per cent, or even less. Therefore, it is more important than ever to make sure employees see value in their total compensation package.
The following is a sample comparison of costs of a salary increase vs. employee benefits:
*Using industry average of 2.19 per cent (circa 2003) **8 per cent Ontario Retail Sales Tax
The net impact is that it costs the employer almost $30 more to implement a raise in pay, as opposed to group benefits. However, the real difference is found when comparing the benefits to the employee.
As you can see, there is a distinct advantage to both employer and employee to implement group benefits, as opposed to a salary increase. Benefits offer comfort and security to employees, as well as added value to an organization to help attract and maintain valuable employees.
If you have any questions, please contact Michael Thomas at the address below. W. Michael Thomas is a partner with The Investment Guild, endorsed provider of the HortProtect Group Insurance Program, and is a director of Ontario Horticultural Trades Foundation. The Investment Guild , HortProtect Insurance, 1-800-459-8990, 11 Allstate Parkway, Suite 100, Markham, Ont. L3R 9T8 www.hortprotect.com, info@hortprotect.com
CFP, CLU, CH.F.C., R.F.P.
Employee compensation continues to be at the top of the list for many employers, especially as the economy continues to tighten. The two most common types of compensation for employees are salary increases and employee benefits. Many companies are being forced to cut back annual pay raises ranging from one to three per cent, or even less. Therefore, it is more important than ever to make sure employees see value in their total compensation package.
The following is a sample comparison of costs of a salary increase vs. employee benefits:
A comparison of costs for the employer
| Annual raise | Group benefits | |
| Enhancement | $1,050.00 | $1,050.00 |
| EI | $30.87 | N/A |
| CPP | $51.98 | N/A |
| WSIB* | $22.99 | N/A |
| Sales Tax** | N/A | $84.00 |
| Payroll Tax | $10.29 | N/A |
| TOTAL COST | $1,166.13 | $1,134.00 |
The net impact is that it costs the employer almost $30 more to implement a raise in pay, as opposed to group benefits. However, the real difference is found when comparing the benefits to the employee.
A comparison of benefits for the employer
| Annual raise | Group benefits | |
| Enhancement | $1,050.00 | $1,050.00 |
| EI | ($22.05) | N/A |
| CPP | ($51.98) | N/A |
| WSIB | N/A | N/A |
| Income Tax Deducted | (362.40) | N/A |
| TOTAL BENEFIT | $613.57 | $1,050 |
As you can see, there is a distinct advantage to both employer and employee to implement group benefits, as opposed to a salary increase. Benefits offer comfort and security to employees, as well as added value to an organization to help attract and maintain valuable employees.
If you have any questions, please contact Michael Thomas at the address below. W. Michael Thomas is a partner with The Investment Guild, endorsed provider of the HortProtect Group Insurance Program, and is a director of Ontario Horticultural Trades Foundation. The Investment Guild , HortProtect Insurance, 1-800-459-8990, 11 Allstate Parkway, Suite 100, Markham, Ont. L3R 9T8 www.hortprotect.com, info@hortprotect.com